Liquid Asset

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DEFINITION of 'Liquid Asset'

An asset that can be converted into cash quickly and with minimal impact to the price received. Liquid assets are generally regarded in the same light as cash because their prices are relatively stable when they are sold on the open market.

BREAKING DOWN 'Liquid Asset'

For an asset to be liquid it needs an established market with enough participants to absorb the selling without materially impacting the price of the asset. There also needs to be a relative ease in the transfer of ownership and the movement of the asset. Liquid assets include most stocks, money market instruments and government bonds. The foreign exchange market is deemed to be the most liquid market in the world because trillions of dollars exchange hands each day, making it impossible for any one individual to influence the exchange rate.

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RELATED FAQS
  1. What is the difference between a bank's liquidity and its liquid assets?

    A company's liquid assets can easily be converted into cash to meet financial obligations on short notice. Liquidity is the ... Read Full Answer >>
  2. What items are considered liquid assets?

    A liquid asset is cash on hand or an asset that can be readily converted to cash. An asset that can readily be converted ... Read Full Answer >>
  3. Why should an investor consider the financial services sector?

    Any serious investor should consider the financial services sector because it offers one of the largest markets that is full ... Read Full Answer >>
  4. What investments have been the poorest historical performers?

    Financial investments that offer low potential gains are technically the worst for investors. These investments are usually ... Read Full Answer >>
  5. Can investments be consumed immediately?

    Consumption refers to the value of a good or service that has been bought. This value is meaningful to the individual who ... Read Full Answer >>
  6. How do I measure option liquidity?

    An option is a financial instrument that gives the holder the right to purchase shares in a company at a certain set price ... Read Full Answer >>
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    A liquidity squeeze occurs when a financial event sparks concerns among financial institutions (such as banks) regarding ... Read Full Answer >>

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